Entitlements for Self-Employed: Discussion with Self-Employed Alliance Dundalk

I welcome the representatives of Self-Employed Alliance Dundalk to discuss matters of concern to them regarding the Department's policies under discussion. I thank them for appearing before us and apologise for the long wait. However, it is hoped our discussion with the departmental officials has provided them with an insight into the Department's policies in this area.

Before we commence, I draw attention to the fact that, by virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the committee. However, if they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against a person, persons or an entity by name or in such a way as to make him, her or it identifiable. I now invite Mr. McArdle to introduce his colleagues and make his presentation.

Mr. Kevin McArdle

I am accompanied by Mr. Fred Matthews, Mr. Cathal Cassidy and Mr. Derek Watters. Mr. Denis Dolan who is self-employed had to leave to attend a prior engagement. He did not expect to be here very long. As a self-employed person, one cannot always hang around for as long as one would like.

There has been much discussion on some of the issues we wish to address. I get the impression that many members have been visited at their clinics by self-employed persons whose situation has increasingly become serious in the past few years owing to the downturn in the economy, which is what drove us to establish our organisation. We thank the committee for providing us with the opportunity to state our case against the unjust and unwarranted discrimination against members of Self-Employed Alliance Dundalk and all self-employed persons in the country. Self-employed individuals have contributed enormously to the financing and social structure of the country. Latest Central Statistics Office figures show that in the first quarter of this year there were just under 300,000 self-employed persons in the State. The people in question employ a larger section of the workforce than the multinationals which many consider are the dominant employers in the country.

I run a shop in my home town of Dundalk, selling outdoor activity products. Self-Employed Alliance Dundalk was formed in early 2011 as a result of the fear, anxiety and lack of hope within the local business community. Our members include a wide range of retail and service providers. Many businesses have seen a dramatic reduction in turnover, while many others have closed in recent years, primarily as a result of the economic downturn. Large numbers of shops have closed in Dundalk, some of which were in business for generations. It was obvious from early meetings of the group that there was a wide diversity of factors which were having a detrimental effect on members, including a lack of credit from banks, the withdrawal of long-term overdraft facilities with little notice and no discussion, the burden imposed by the local authority rate increase, bad debts and redundancy payments, etc. However, the number one issue of concern for many self-employed persons was that there was no safety net for them from the Government when things went wrong.

Examples of the disadvantages of being self-employed, as identified by our members, are, first, there is no exposure to unfair dismissal procedures; second, there is no guarantee of a weekly or monthly income; third, there is exposure to financial risk in carrying out work, including bad debts where they arise. In addition, when things go wrong, family homes can be repossessed. The fourth reason is the lack of social welfare benefits available should they become unemployed. Illness, disability and unemployment are not covered by class 3 contributions.

Fifth, most self-employed persons cannot qualify for jobseeker's benefit since it is only given to those who have paid class A PRSI. Sixth, there is no requirement to provide for holiday pay. Seventh, the self-employed are not entitled to extra pay or time off for working overtime - generally, the self-employed put in much greater hours. Eighth, the self-employed are not entitled to sick pay. Ninth, they have no invalidity pension cover; and, tenth, they are not entitled to redundancy payments. Eleventh, in calculating jobseeker's allowance, if the amounts drawn are higher than income, the drawings figure is used.

Twelfth, in calculating income, the deciding officer will ask for the previous set or, possibly, the previous two sets of financial statements, but many self-employed persons' previous accounts will be for 2010. It is possible, therefore, that a person with a year-end date of 31 January may be assessed on accounts for the period 1 February 2009 to 31 January 2010, that is, up to 2.5 years ago and much will have changed in that period. Thirteenth, jobseeker's allowance is available if income is below a certain level. One can remain registered as a sole trader. However, the rules also state one must be available for work which, if self-employed, technically, one is not. Fourteenth, there are problems in obtaining rent and mortgage interest supplement, as it is only available to those working less than 30 hours a week. Self-employed persons have obvious difficulties in establishing the number of hours they work. Fifteenth, owing to rules relating to the number of hours worked, self-employed persons are not able to claim family income supplement. Sixteenth, the PRSI system is a disincentive to self-employment - a key component of economic recovery and job creation. No safety net is provided if things do not go to plan. Therefore, the risk taken in starting a business is greater. This could put off would-be entrepreneurs from taking that risk. Seventeenth, there is a reliance on social welfare deciding officers to decide on claims rather than having exact and complete rules. As self-employed citizens, we do not enjoy equal status when it comes to unemployment assistance, which most PAYE workers take for granted. Self-employed workers cannot make the same contributions as PAYE workers, but they must pay most of the PRSI contributions of their employees.

As self-employed workers, we have made significant sacrifices and are still making them. Most of us work a minimum of 50 hours a week - some work more than 70 hours - yet there is no recognition of the hardship we must endure to keep our business going. We invest our time, money and health to keep us from going under. Most of us do not recognise words such as "overtime", "holidays", "days off", "sick pay", "lunch breaks", etc. The committee may not believe us, but these are luxuries we seldom enjoy. Many of our members could not come here today because of work commitments. Most of us are rushing back to our businesses after the meeting. An employee could simply take a day off.

How much have we contributed in financial terms to the country through income tax, PAYE, PRSI, USC, RCT and VAT? What is our reward if we find ourselves, as many already have, in a situation where we can no longer support ourselves? When we turn to the system to which we have been paying most of our earnings in one form or another, we are told we are not unemployed citizens but unemployed self-employed citizens. At social welfare offices we have been turned away because there are no benefits available and no recognition of self-employed unemployed workers. One is then put through the mill of assessment to be told that one may be entitled to this or that, but, unfortunately, it usually means one is not entitled to anything, which leaves one feeling like a criminal.

This group of unemployed self-employed workers and self-employed workers who may yet find themselves unemployed came together to try to address this appalling inequality. We want equality, like all other citizens of the country. We want to be able to make the same PRSI contributions as all employed workers and also to receive the same benefits without omissions.

In accordance with a commitment given in the programme for Government, in 2011 the Minister for Social Protection established an advisory group on tax and social welfare. Included in its terms of reference were:

To constitute a forum to which the Minister for Social Protection may refer specific issues around the income supports and tax systems so that they provide good incentives to take up work and to contribute to the reduction of poverty and child poverty ...

To examine and report on issues involved in providing social insurance cover for self-employed persons in order to establish whether or not such cover is technically feasible and financially sustainable ...

The terms of reference also stipulated that the advisory group should consider any proposal for changes to existing arrangements in a cost-neutral or cost-reducing context. The Minister recently stated any change to the PRSI system to provide access to short-term benefits such as jobseeker's benefit would have significant financial implications and would have to be considered in the context of a much more significant rise in the rate of contribution payable. She also noted that the question of social insurance cover for the self-employed was being considered in the actuarial review of the social insurance fund which was due to be completed in mid-2012. We await same.

The Oireachtas website outlines three major areas covered by the Joint Committee on Education and Social Protection, two of which link directly with our goals: ensuring our most vulnerable citizens are protected by a strong and equitable social welfare system; and supporting economic recovery. Therefore, we appeal to the committee to take on board our views when discussing the formulation of future legislation in this regard. We want equality and justice.

I will hand over to Mr. Fred Matthews who has been through the process of seeking unemployment benefit.

Mr. Fred Matthews

I have been self-employed as a pharmacist all my life and I am now 62 years of age. I have employed between 20 and 25 persons for up to 25 years at a time and contributed millions of euro in tax to the State. Three years ago my financial well-being hit a wall and I am now treated as worthless by the State. My daughters decided to go back to education and, because they did not understand the social welfare system and had worked up until the time they sat the leaving certificate examination, were unable to access grants. They had worked until the month of May, sat the leaving certificate examination and obtained their places. However, if they had gone on the dole or received jobseeker's allowance in February, they would have been fully funded by the State. I went to the VEC and other places looking for help because I did not have the ability to fund the fees. I came out of the VEC in tears; I felt humiliated. At 59 years of age the State had nothing for me. I went back to work. All I understand is that, as an individual, I can create wealth and generate an income. It is humiliating that my adult daughters, because I am perceived to have the wealth I used to have, are being put through the mill to receive a basic education. It is stressful and I have had to attend for counselling to get myself in fit shape to live a life. It has affected my whole family. This is the impact on the self-employed. I am independent, but what I do is lunacy. I create wealth instead of finding a job. People tell us it cannot be done, but one goes and does it. That is the core of independent SMEs, but it is being decimated and savaged by being ignored. That independence leaves us totally isolated because we are easily picked off.

I am looking for leadership from members and the Deputies and Senators who lead the country. They give me the impression that they are on this treadmill that was vacated by the Fianna Fáil-led Government and that they are busy running, but they lack a vision for the future. Without the ability and support of SMEs, the country will collapse totally because they create the wealth and employment. I employed 25 persons; now I am indebted everywhere. Social services which are within the remit of the committee should be available to me and my family when needed. No one should feel like a second-class citizen in the State.

Social services, which fall under the remit of this committee, should be available to me and my family when needed, and one should not be made feel like a second-class citizen. I ask that the system be changed so families associated with SMEs can have access to social services.

Normally SMEs go to the credit union when they are stuck. I realise this is not in the remit of the committee. The credit unions are currently being crucified. To date, the organisation has not received one shilling from the State, yet it is being posited as a failure. The unions were established by SMEs and people such as myself and my father, yet we cannot get money from them either.

Where does a person such as me go for money to educate my daughters? The State does not give them support by way of social protection. We have learned a lesson. One of my daughters had a baby, went on maternity leave and is now on the jobseeker's allowance. She buys my rugby tickets and funds my trips if I want to go away because I cannot afford them. That is the current position; it is the state of the world in which I live. While I will get nothing off the State - I do not expect to - it should at least treat my family fairly.

When we were examining this issue, Deputy Butler suggested the delegates would have some insight into it. We very much welcome the delegation's contribution because it is good to receive a briefing on how people are affected on the ground.

Mr. Fred Matthews

There should be a means of giving an SME funding instantly in an emergency. It could be assessed later. If I go broke, I will have nothing tomorrow.

We will take questions and give Mr. Matthews a further opportunity to elaborate on the points he is making.

This committee does not formulate legislation but we, as Oireachtas Members, have an input into its scrutiny. It is possible to introduce Private Members' legislation. Legislation generally comes from Departments. One reason for this meeting is to highlight the issues that arise and focus on the detail from the delegates' point of view.

According to the usual order at meetings, we will begin with the Fianna Fáil spokesperson.

I thank the delegation for its presentation. While it was quite succinct, it was very clear and comprehensive. When the delegation referred to the context of job losses, etc., it could have been talking about my town. I know exactly where it is coming from.

One will have noted from the discussion with the officials that we are all aware of the imbalance between the treatment of the self-employed and the treatment of other employees in the social welfare system. I thank the delegation for its efforts to help correct the imbalance. It is quite a sacrifice for those who are trying to run their businesses daily to form a pressure group. They put a lot of time and effort into their cause. It is a sacrifice for the delegation to be present here today. My party is now aware that there is a severe imbalance between the treatment of the self-employed and the treatment of employees with regard to the social insurance scheme. I deal with this daily in my constituency. I will work very hard to ensure the sacrifices the delegation is making to correct the imbalance are not being made in vain.

I welcome the delegates. It is great to see them making a presentation. Their concerns comprise one of the most significant issues that arose on the doorsteps during the last general election campaign.

I had a shoe shop for 24 years and have been self-employed all my life. It is disappointing to see so many doors being shut and a lack of information. Self-employed people really do not know their entitlements because they are busy protecting their businesses and getting on with what they do. For a self-employed person to enter a constituency office is a huge step. The self-employed have never been in looking for anything in their lives and, therefore, do not know their entitlements. All self-employed people have done all their lives is paid. They kept paying.

My late father – Lord have mercy on him – used to say that once one puts one's name over the door and becomes self-employed, one becomes an unpaid tax collector. It is great to see the delegates making their case. Many of the Senators and Deputies are aware of the problem that exists because they have encountered it in their constituencies. They hear about it daily.

Many self-employed people have battled to retain their businesses, yet those businesses have deteriorated even more. They are receiving no help from the banks or credit unions. I agree totally with Mr. Matthews on this. The self-employed have been using their savings and the savings are now drying up. If we are serious about getting this country moving and taking it out of its current mess, we will need self-employed people and SMEs. The latter will restore the country. We need a safety net for SMEs.

I am delighted to see representatives from the Department of Social Protection present. They have changed their attitude to the self-employed and their entitlements considerably since I became a Member 18 months ago. In fairness to the Minister for Social Protection, she is working on the issue. An independent group is producing a report and we will determine how we should proceed when we receive it.

Circumstances have changed. During the last general election campaign, I was on local radio, LMFM, and remember Mr. Michael Reade asking me what I would like to do if I got elected. The issue we are talking about is one I said I would like to address because it has affected me personally. I know what it is like to go home with the stress and strain of trying to pay one's bills, including one's rates, electricity bill and staff bill. The SME owner is the last person to get paid and does not get a shilling at all some weeks; he or she is just trying to survive. I know what it is like to have no money and to bring all one's pressures home with one. We need a safety net for the self-employed if there is to be progress.

When I know we are in tough times, I realise we need a safety system if we are to get the country going again. Self-employed people and SMEs will get the country out of the hole it is in if they are given a chance.

By way of explanation, the reason the Senators left earlier is that they had to attend a vote.

I apologise for my having had to leave to attend a vote in the Seanad. However, I brought the presentation with me and was reading it when voting.

We are all singing from the same hymn sheet. Since I became elected, I have raised the problems of the self-employed on numerous occasions in the Seanad; this is on public record. Every time there was a debate on social welfare in the Seanad, I raised the problem of the self-employed. At every meeting of this committee since I became a member two months ago, I have raised the issue, and I will continue to do so. We await the advisory committee's report and I hope it will contain recommendations that suit the self-employed.

While we are always worrying about the big multinational companies and saving 400 jobs here and 300 there, we must realise that if we concentrated on retaining one job here and two or three there, the combined number would be considerable. The self-employed, while generating an income for their families and not drawing on the Exchequer, help their few employees. It is vital, therefore, that we help the self-employed. I will continue to fight their case until we achieve at least some of their objectives.

I welcome the representatives of Self-Employed Alliance Dundalk. I am a newly elected Deputy and know how hard it is to appear before an Oireachtas committee to make a statement. The delegates have done a fantastic job. Mr. Kevin McArdle’s presentation was very honest. He did not leave anything out and everything he said is true. It took a lot for a very established businessman in Dundalk to make time to come here to tell the truth. He is a very lucky man to have the support of his family. I thank everyone who made a contribution.

I am a former self-employed person and fully appreciate the position of the delegates. I employed 20 people.

My business was different. One gave people 60 or 90 days' credit and depended on them to pay. All that our guests wanted after busting their backsides and providing a fantastic service was to get paid. If someone did not pay them, it was not their fault. The system is wrong where the self-employed are concerned. They took a chance, tried to better their lives and took people off social welfare. They have done everything right. If a business is not going well, one-----


There seems to be mobile telephone interference. Whoever it belongs to might move it.

Our guests put their savings and every penny they have into their businesses. I commend them. Members from the Louth and east Meath area are present and would be happy to help. Too many people talk without acting. Do not be afraid to ask for our help. As a newly elected Deputy, I know the efforts our guests have invested.

We needed to leave the meeting to vote. I apologise for having missed some of Mr. McArdle's presentation. Like my colleague, I read it in the Seanad Chamber. We are all singing from the same hymn sheet and well aware of the issues. I am married to a self-employed man. The mention of being unable to take a holiday was particularly poignant. The employees are paid and well looked after in terms of PRSI, etc., but the self-employed are caught in a loop and nothing can be done for them.

There has been plenty of talk, but we need to progress matters. Perhaps our guests have already offered their opinions, but how best can we support them further? In the past year, I have been inundated by self-employed people attending my office. Being expected to pay rates is a big deal for someone who has never sought anything from or been beholden to the State. As a PRSI and PAYE employee, I never needed to deal with such considerations. Everything was deducted from my final cheque. It is shocking that self-employed people are still expected to pay their bills even when they are receiving no money. I would value our guests' opinions on how we can best help them.

I welcome the Self-Employed Alliance Dundalk. This is a major issue for the entire country and the Department of Social Protection must address it. The cost of providing social insurance for self-employed people will need to be met, but that insurance is necessary, given the significant increase in the number of people seeking help in this regard. I would support a system of social insurance for the self-employed. I hope that the committee will determine to support such a system as well.

Our guests heard the departmental officials. The Social Insurance Fund report has been published and is available online. If physical copies are required, we could point our guests in the right direction. The report states that it would take a contribution of 15% to 16% to get the State pension and other benefits. How do our guests feel about self-employed people being required to pay extra contributions while they are at work?

Mr. Fred Matthews

I am 62 years of age. What sort of pension would I get if I started paying now?

I appreciate that, but-----

The class S stamp would get Mr. Matthews a pension anyway.

That is exactly the point that needs to be made. The 4% gives one entitlements to the State pension, but one would need to pay the additional contributions outlined by departmental officials to receive jobseeker's benefit and other benefits. How does the group feel about doing so?

Mr. Cathal Cassidy

We just want equality with the employees. We want to pay what they pay and get what they get.

As an employer, Mr. Cassidy pays a contribution for his employees.

Mr. Cathal Cassidy


Would he be willing to pay the employer's and the employee's contributions?

Mr. Cathal Cassidy

Can we count ourselves as being employed by ourselves?

Mr. Cathal Cassidy

As self-employed people, we want to be employees and employers.

The employee's overall contribution comprises the employer's contribution and the employee's contribution. Our guests are suggesting that they only make the 4% contribution yet receive all of the entitlements.

Mr. Cathal Cassidy


Could they clarify?

Mr. Derek Watters

This morning, the official outlined the different rates determined by KPMG. They were as high as 17.3%, yet that rate did not include all of the benefits. Mr. McArdle rounded off his presentation by stating that we were looking for equality. We have no difficulty with paying the additional PRSI and we do not expect to get benefits without paying for them. However, I have a difficulty with paying an additional 3% or so and not getting the same benefits.

That 3% provides many benefits. The departmental officials were adamant that the benefits were good, in that they included an old age pension, a survivor's contributory pension, the bereavement grant and maternity benefit. We are trying to get the self-employed into the bracket for other benefits, for example, carer's, jobseeker's and illness. The extra payments would go towards them.

Mr. Fred Matthews

There is a sense of unentitlement and frustration at the bureaucracy that has a chance of delivering entitlement. It would be brilliant if our entitlements could be put on our payslips.

Mr. Derek Watters

Not knowing is an issue. An employee who becomes redundant goes to the Department of Social Protection and sees his or her list of entitlements. Senators and Deputies spoke this morning. That there are different district offices poses difficulties.

There is no uniformity.

Mr. Derek Watters

One is left to the discretion of individuals. A notice might be sent to local offices concerning these items. As we heard this morning, however, some offices tell self-employed people that they will get nothing while others tell them they will. Clarity needs to be brought to the situation.

The self-employed need clarity. As self-employed people, our accountants do our books, we pay what we must to Revenue and we pay for our stamps. We receive receipts from Revenue and in respect of our stamps, but are not told what "class S" stands for. When we were in-----

The booklet tells people what it means.

Yes, but self-employed people are busy. What "class S" means should be written on their receipts. The Department could do this. When we were county councillors, we were all on class K stamps, which is a different type of stamp. When I closed my business and sought to find out whether I was entitled to the family income supplement, FIS, I had to wait 25 weeks for a decision. I did not have two bob to rub together. The decision was that I was not entitled, as I had not paid a class A stamp.

This is basically where it breaks down as there is no information out there for self-employed people. We have been ignored for years and put in a corner but we paid the bills.

The point is being made regarding equality. I did not get an answer this morning from the Department of Social Protection as to why PAYE workers would pay a total of 14.75%, made up of rates of 10.75% and 4%, with self-employed people having to pay a rate of 17.3% and not even getting the same benefits. If this has an actuarial basis, we must consider both sectors and formulate one true figure rather than two. The principle of entitlement should be considered first.

When we first addressed this matter I asked a question of the Department of Social Protection about getting a stamp for self-employed people and the figure quoted had a rate in the high 20s. Now the rate is at 17%. This is pie in the sky so we should see what the working group produces and move forward.

The presentation this morning discussed the financial position and how the Department goes back two and a half years in a business history. Two and half years ago I am sure people's businesses were thriving, so there is no true reflection of what is happening now. There should be some kind of emergency provision so that people could get money now while the Department considers the circumstances of that business. Two and half years is a long way to go back in anybody's books.

We had a meeting concerning social insurance and a presentation about the KPMG report. That was one of the issues raised by Deputies and Senators. The 17% figure arises as the fund has a shortfall of approximately €1.5 billion this year and will have a shortfall of €3 billion in four years. There will be a major shortfall in years to come if nothing is done. The 17% figure comes from an assumption that the shortfall cannot be widened further. We had a comprehensive debate and we can send links to the transcript to interested parties.

Mr. Fred Matthews

The nub of the matter is that small and medium enterprises are independent and different. There is a bit of a maverick about them as they act in ways that others may not. It may not be easy to find a certain element and that must be encompassed in whatever system is put in place for small and medium enterprises. It is against the grain for any of us to look for something. One may feel awkward or remiss or rejected if somebody is looking for a form. These business people need help and are not looking for a hand-out. Nobody wants to do that.

That applies to the population in general and there are issues concerning how people are dealt with when they interact with the Department of Social Protection. There is a need to make the process more user-friendly so that the information can be available to people and so on.

This is more of an observation than a question. This morning I asked about an optional payment and I am disappointed that the group is not agreeable to this; it seems it is all or nothing. The bigger self-employed businesses, which are making some money, may fight such a process because they may not want to pay extra. I was hoping people could opt for a payment and if they fell on hard times, they would be able to draw benefits.

There must be a fight for credit contributions as it is vital for pensions. There will be a gap in the pensions of these business people if they do not get that credit stamp. It was not mentioned in the presentation but it is vital. I hope the witnesses will fight hard for that and we will fight from this end.

I thank the Chairman for inviting the group and the representatives of the Department of Social Protection for coming in. It is a long road we must travel and we are getting there slowly. I think all Senators and Deputies are singing from the same hymn sheet. This is a work in progress.

Mr. Derek Watters

I thank the committee for inviting us here today to give a presentation. We will always be available for future input. We thank the Chairman for giving us the opportunity to speak on behalf of the self-employed this morning.

I thank the witnesses. It is very helpful to speak to individuals affected by the issue we are discussing. I assure the delegation that the issue is constantly being raised at the committee by Deputies and Senators, and it has been discussed in recent weeks. We will continue to do this. The committee does not bring forward legislation but we can raise the issue when legislation is discussed or the Minister is before us. We will send a copy of the presentation to the Minister and ask for her views on what the witnesses have said. When we get a reply from the Minister we will send it to the witnesses. Any further comments to the committee may be put in writing and we can keep it in mind. I thank the representatives of the alliance for briefing us so comprehensively.

The joint committee adjourned at 12.20 p.m. until 10 a.m. on Wednesday, 10 October 2012.